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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

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April 3, 2014

Martin Parkinson, the Secretary of the Treasury, delivers a speech to the Sydney Institute that warns that there would be no return to budget surplus in a decade without increasing indirect taxation.

Yet the Abbott Government continues to campaign on reducing taxation (dumping the mining tax and carbon pricing), partisan point scoring and left-baiting. It dumps these sources of income that are used to pay for schools, roads and hospitals and plans to lift defence spending to 2 per cent of GDP.

RoweDPup.jpg David Rowe

The Abbott Government knows that the federal government expenditure on health , education and disability insurance is increasing government expenditure; and that allowing inflation to increase the tax take through allowing so-called bracket creep to push lower and middle income earners into higher tax brackets is not politically sustainable.

Parkinson argues that Australia needs to consider increasing the proportion of government revenue collected from indirect taxes such as the goods and services tax or fuel excise. The alternative is austerity: a program of progressively deeper cuts to public services.

The WA Senate election indicates that conservatives reckon they are on a roll. Their strategy is to divide society into those who think they can cope with globalisation and those who cannot; then shower the former with praise and modest enticements – whilst attacking the latter in the service of political popularity. They use this to appear economically modern, radical and innovative, even though they push to one side greater equality, a public realm as distinct from the private market, keeping capital in check, or welfare security in an insecure world. Government spending on public education, for them, is seen as only a cost, and never a benefit.

The neo-liberals have little in the way of any policy agenda to lift Australia’s productivity performance through increasing our innovation, raising our human capital, or investing in the knowledge economy. Surprisingly, Parkinson says little about increasing the levels of tertiary education, in the skills of our workforce, and invest more in research and development.

Yet he would know that this is crucial, if Australia is to raise its living standards in the global economy, given that, as that the mining boom is moving to its production phase, fewer jobs will be created and investment will begin to decline. He would know that economic globalisation for unskilled workers means competition with low wage countries and that often means stagnant wages and greater job insecurity. It's the skilled workers who are best positioned to thrive in a globalised world, since they can work in different countries.

It's the unskilled workers who feel they are being left behind by Australia's rapid economic and social transformation as their industries go offshore and their neighbourhoods are changed. Parkinson was also silent about what will replace resources investment as the new driver of economic growth.

For the Coalition in Canberra the answer is a bout of fiscal austerity, not encouraging the fragile recovery in the non-mining sectors---eg., housing, retail, transport, and city infrastructure. Nor does Parkinson say anything about Australia needing to improve its energy efficiency and productivity.

| Posted by Gary Sauer-Thompson at 7:57 AM | | Comments (7)


The Treasury scenario:

Health spending is set to increase significantly, as will pension payments and the cost of the national disability insurance scheme. Combined with falling commodity prices, an ageing population and the aim to increase defence spending, the budget challenge will be significant.

For the budget to be repaired through growth alone – without spending cuts or tax hikes – the economy would need to expand by a massive 5.25 per cent a year to return to surplus within five years.

That ain't going to happen.

Parkinson argues that both revenue and spending measures must be addressed.

Will Pup take a seat of the Liberal Party in the re-run WA Senate election of Saturday?

The circumstances of a statewide by-election are less favourable to the Liberal Party than a national election. The Liberal Party would like to destroy PUP.

The WA Senate election will be a tight.

WA still sees itself as a Frontier --the Wild West---a view fostered by the rhetoric of Big Mining that holds Western Australia has been carrying the rest of the (lazy, mendicant ) nation on its back.

Lets hope that WA's voters prevent the Abbott Government gaining the balance of power in the Senate.

According to Big Mining it was the mining industry in WA that stopped Australia dipping into negative economic growth during the Global Financial Crisis, not the Rudd Government.

Parkinson's message was that Australia is living beyond its means.

We don’t collect enough taxes to pay for public services. The good times can’t go on forever: sooner or later, we will face a recession. There are no easy answers; only tough decisions to raise taxes and cut spending can bring the budget back to balance.

Raising the GST will alleviate the need for increases in income tax, which Parkinson says, the budget risks becoming over-reliant on.

So tough times lie ahead.

The Abbott Government's solution to the new drivers of economic growth is to build more roads. So they are push state governments to sell energy infrastructure to provide the funds for more roads.